01.06.2021 (http://www.fnbnews.com) - The Middle East and North Africa (MENA) comprises of 25 countries with a population of almost 700 million people or 10% of the total world population. The Middle East and Africa vegetable oil market is projected to grow at a CAGR of 4.31% during the forecast period (2020 - 2025). The Middle East edible oil market is expected to witness massive growth in the future. The business landscape is characterised by intense competition.

The market was estimated to be worth 388,944.3 tonne in 2015 and is anticipated to reach 559,775.89 tonne by 2024. The vegetable oil market in the UAE is led by oils category in both value and volume terms.  The oils and fats sector is expected to grow at a CAGR of 4.2%. The Middle East and Africa edible oil market is expected to reach $8227.38 million by 2027 with a CAGR of 6.9%.

Drivers for growth

Growing urbanisation, changing lifestyle and Western influence are driving Governments to highlight the adverse effects of long term consumption of trans-fats that are often used in baked products and biscuits. New categories of oils like virgin olive oil, cold pressed walnut oil and coconut oil are gaining market traction, albeit gradually. Government campaigns about health awareness are reducing information symmetry between manufacturers and consumers and spurring growth of edible oil industry. Increase in demand for processed food is fuelling increase in consumption of edible cooking oils.

Hotels and hospitality sectors have to cater to customers who visit ME from across the globe. Culinary requirements of tourists have to be addressed. This calls for sourcing different types of edible cooking oils. Growth in tourism-enabled jobs has led to increase in purchasing power of the local population. This in turn has a positive impact on the food industry’s prospects. This augurs well for the edible oil industry.

The population in Saudi Arabia comprises urban, younger and educated individuals and their affluence completed by health consciousness makes them choose oils that are lower in cholesterol and saturated fatty acids.

Demand for edible oils is witnessing a favourable growth trend in Middle East. Lack of agricultural capacity makes ME region rely on imports. Climatic conditions are also unfavourable. Low rainfall, quality of soil and desertification of the land are some of the reasons for low production of edible oil in the region. Middle East region has to manage supply risks and price risks due to the dependence on imports.

If we take Qatar region as an example, then this region is characterised by an affluent lifestyle and growing Western influence. Yet, health concerns associated with increase in edible oil consumption have an impact on consumption and demand for oils. Huge capital investments needed in green field cooking oil manufacturing installations dissuade new entrants.

The positive aspect is growing interest in research to manufacture high quality edible oils that have preponderance of poly unsaturated fatty acids, mono-unsaturated fatty acids and vitamin E, and Omega-3.

Market Demand

In terms of revenue, sunflower oil has dominated the market. The health benefits, taste and nutritive abilities are an attraction for consumers. Imports of palm oil have increased because of its lower price and affordability for low income population. Technological advancements – particularly in packaging – are luring consumers. Way back in 1985, IFFCO launched the Noor brand of Sunflower oil and this was trans-fat free.

As the region does not produce sufficient oilseed for domestic use, it is dependent on imported oilseed and oils and fats to supplement the domestic requirement of oils and fats. The market currently consumes 27% of palm oil, 25% of sunflower oil and 19% soybean oil and others 29%. In 2018, the region imported 48% palm oil, 28% sunflower oil and 18% soybean oil.

The region’s dependence on imports as their main source of oils and fats make it a ready market for palm oil. Palm oil consumption is rising in Middle East due to its application in bakery and dairy products, savoury snacks and confectionery. Increase in food service outlets (fast food outlets in particular) is leading to this trend of increase in consumption of palm oil. Saudi Arabia is one of the major importers of Palm oil from Malaysia and Indonesia.

Olive oil enhances the flavour of traditional Middle Eastern dishes and also adds to nutritive value. Olive oil can be added to most dishes made with meats, fish, vegetables and beans to add flavour. It can also be used in baking breads and even some desserts. Olive oil is a monounsaturated fatty acid (MUFAs) which is considered to be a healthy fat.  MUFAs lower total cholesterol and LDL (bad cholesterol). Other research studies point out that the MUFAs may help individuals with type 2 Diabetes by controlling blood sugar and insulin levels.

In the last few years, consumption of rapeseed oil in UAE has been stagnant. But production of Canola oil is such that exports of Canola oil have increased. Oils like sunflower oil, soybean oil are used in personal care application. A USDA report claims that the Middle Eastern region imported 248000 MT on Soybean oil in 2018-19. Soybean oil dominated the edible oil market in Middle East due to high demand. Corn oil, olive oil and palm oil are other oils that are consumed in Middle East.

Customer-centricity for sustainability

Consumers in ME region are price sensitive while purchasing a particular brand of edible oil. As consumers focus on health and wellness, olive oil, canola oil and sunflower oil are gaining more popularity due to their nutritive content and lower saturated fatty acid content. Increase in consumption of edible oil based packaged goods has also led to greater demand for edible oils.

Manufacturers supplying edible cooking oil have adopted product innovation as the strategy due to changes in consumer preferences.  Manufacturers in ME desire to give consumers the perfect balance between health and taste. Intense competition in Middle Eastern market has made it essential for suppliers to use innovative marketing strategies to attract more customers. A customer-centric approach is essential for growing the customer base.

Hypermarkets and supermarkets serve as efficient distribution channels. Attractive packaging, in-store promotions and advertisements are being used to influence buyer behaviour towards the purchase of edible cooking oils.

Increase in domestic production of edible oils can address challenges of supply and price risk. The future of ME edible oil market will be driven by growing consumer awareness about health and food ingredients. Saudi Arabia holds great promise in terms of edible oil market that has the greatest potential to grow.

(The author works with Presidency College, Bangalore)